Full-ratchet anti-dilution is the punitive flavor that resets the preferred conversion price to the new lower price in any down round, regardless of round size. It produces massive dilution of common stock and founders even for relatively small down-round capital, with modern usage largely limited to distressed financings, aggressive structured deals, and down rounds where the new investor has significant leverage. It is the term sheet flag founders should generally treat as a deal-breaker and only accept when the alternative is no deal at all.
The full-ratchet mechanic: